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A well-crafted watchlist is critical to smart investing: It can help you find attractive buying opportunities, and it can save you from bad decisions.
After all, investors can be their own worst enemies. When we overreact to the day's news, we make rushed decisions driven by emotion. A watchlist can help you slow down the process, examine the risks, and essentially take a deep, money-protecting breath. The Fool now offers MyWatchlist.com, your customized hub to follow the performance and Fool news and commentary about the companies you're watching.
But what to put on your watchlist? Today, Global Gains advisor Tim Hanson shares three companies that have taken up residence on his watchlist and one that has since made the jump to the Million Dollar Portfolio team's portfolio.
One to watch
People need food and farmers need fertilizer to grow that food. PotashCorp (NYSE: POT ) is ideally positioned to deliver on that for the long term. Of more immediately pressing interest to investors than the world's food supply, though, is the effort by Australian mining giant BHP Billiton (NYSE: BHP ) to buy the Canadian company.
If the deal goes through, it's probably not worth watching the company any longer (and, well, it will be impossible because that ticker will go away). But if, as is now appearing likely, the Canadian government refuses to allow the deal, there's a good chance the value of the stock will plummet since it was the whiff of acquisition that drove it up in the first place. If it falls precariously from its current heights of about $140 per share, investors might have a great opportunity to get a long-term winner at a discount price.
Two to watch
It's also worth watching oil services company Core Laboratories (NYSE: CLB ) , although there's no single event that should serve as the turning point in Tim's investment thesis. In short, the company's technology helps drillers maximize the production from their wells, wringing a significant increase in oil from each. With oil demand climbing and the supply steady or dropping, that's a fairly compelling sales pitch.
If energy prices continue to rebound and its potential clients invest in growth, Core Labs should flourish. And if oil prices, in Tim's technical terms, "go crazy" without a corresponding rise in Core's share price, he'll jump on the stock. But with Core Labs' stock up more than 30% this year, there's already optimism for aggressive growth expectations baked into the price of the stock. Keep an eye on the share price, the news, and the price of oil.
Three to watch
Coming up on its second anniversary as an independent company, Virtus Investment Partners (Nasdaq: VRTS ) is worth watching to see if it can continue its climb to profitability. The small-cap asset manager has reported strong performance since it was spun off from The Phoenix Companies (NYSE: PNX ) and now boasts a hefty $27.1 billion of assets under management (AUM). And this is a bet as much on the market as it is on the company itself. After all, a company can grow its AUM by gathering new money or through returns, and Tim is optimistic that the market of the next 10 years will outperform the market of the past 10 years. "Even if the market only returns 5%, that means Virtus would grow its AUM by 5% without bringing in any new investments, and that would lead to nice returns from where we are now."
Tim is going to watch this relatively young company for another couple quarters before making a purchase, but it's definitely earned a spot on his watchlist.
And one he bought
Domestic analysts have been focusing on the smaller U.S. markets and the urban centers that Wal-Mart (NYSE: WMT ) had yet to conquer as the core of their investment theses. Tim, as befits the advisor of the Fool's Global Gains investment service, looked at the company's growth opportunities with an eye toward the international. He held it on his watchlist for months with the thought that the retailing giant had much more significant potential in emerging markets.
So when Wal-Mart made a bid to buy South African retailer Massmart Holdings, which would give it a toehold in Africa, Tim took notice. And with a foray into India now looking more plausible , Tim's investment thesis seemed to be proving on target. So the stock jumped from Tim's watchlist and into the Fool's Million Dollar Portfolio, backed by a compelling growth story at a reasonable price.
And that's exactly why it pays to watch. You can make smarter investing decisions with your own version of My Watchlist, new and free from the Fool. Click below to start following one of the stocks mentioned above: